The first climate finance fund signs IATI

The Adaptation Fund Board officially signed on to the International Aid Transparency Initiative (IATI) today. The Fund’s mandate to provide funding to the most vulnerable people in the world to combat the devastating effects of increased droughts, rising sea levels, and other natural disasters due the effects of climate change is a major challenge and the resources available are small in comparison to the demand.

In the larger scheme of development aid and even within the sub-set of climate finance, the Adaptation Fund is still a small player having approved projects and programmes worth a total of US$ 184 million to date. Given the Fund’s small size, why is it important that it has made a commitment to the IATI principles and agreed to take the necessary steps to publish IATI compatible data?

While relatively small in the climate finance landscape, the Adaptation Fund has been a first mover in many areas. The larger impact of the Fund may very well be its ability to be flexible and to pioneer initiatives such as:

1) Market-based resource mobilization: most of the aid architecture for climate finance is through country contributions; the Fund, however, receives revenue from a two per cent levy on emission reductions from the clean development mechanism. To date this has generated 188 million USD.[1]

2) Direct access to climate finance for developing countries: the vast majority of climate finance flows to recipients through multilateral organizations such as the United Nations, World Bank and other regional development banks. The Adaptation Fund, however, is recognizing strong institutions in developing countries and letting them take on the implementation of projects and programmes on behalf of the country.

3) Governance structure: developing country governments have a majority of seats on the Adaptation Fund Board.

4) Results management:prior to approving a single project, the Board approved a results-based management framework, which not only gives its work a strategic focus but has set indicators and targets for process effectiveness.

The success of the Fund in establishing an effective framework for climate finance is being examined with interest by donors, civil society, academics, and policy makers. As the devastating effects of climate change become increasingly clear, and attention turns to scaling up climate finance through the long-awaited Green Climate Fund, the experience of the Adaptation Fund is ever more critical.

The Fund is keen to share its successes and lessons learned so that the larger community can improve the effectiveness of aid delivery within climate finance generally and with specific attention to climate change adaptation. By becoming a signatory to IATI, the Adaptation Fund is confirming its commitment to openness and transparency.

At this juncture it is critical that all players involved in providing climate finance move toward publishing data that is comparable and accessible for several important reasons:

1) Organizations cannot function as isolated islands: the Adaptation Fund is part of a larger climate finance architecture that is becoming ever more fragmented. The broader community of those involved in climate finance, from foundations and bilaterals to multilaterals and the newly emerging Green Climate Fund must cooperate and build a shared understanding of financial flows.

2) Data should not be a cryptic puzzle: in today’s world, data is plentiful. However, it is not easy to understand, compile, compare, or aggregate. IATI provides a platform through which data can be accessed and used by anyone, anywhere in the world.

3) Effectiveness can only be improved if we understand where and how money is flowing: even with all of the efforts placed on transparency, openness and accessibility, it is still difficult to trace each dollar to its end use. The need to assist vulnerable communities in adapting to the effects of climate change are tremendous, but we cannot improve the delivery of aid unless we know how and where the money is being used.

Given its relative youth, having become operational in 2010, the Adaptation Fund’s data sets are of a manageable size. It therefore makes sense that the Fund take the lead within the climate change finance landscape to publish IATI compatible data. The hope is that the example of the Fund will encourage others to sign on, as a step toward a more cohesive and cooperative architecture for climate finance.

Dima Shocair Reda is an operations officer at the Adaptation Fund secretariat. She manages the Fund’s accreditation process and is in charge of the results management system.

[1] While unique, the volatility of the market has led to an unstable revenue stream. The recent crash in the price of CERs has meant that the Fund must now rely more heavily on voluntary contributions.